The Income-Tax Department has challenged the income Tax Appellate Tribunal (ITAT) decision in the Bombay High Court that allowed over 100 stock broking firms entitlement to depreciation claims on the cost of their Bombay Stock Exchange membership cards.
The appeals against various stock brokers have been pending over the past three years and are likely to be heard together before the division bench of Justices FI Rebeillo and RS Mohite on Monday.
The stock brokers include the likes of ICICI Brokerage Services, J M Morgan Stanley Fixed Income Services, Jhunjhunwala Stock Brokers, Net Worth Stock Broking, R R Chokani Stock Brokers, Kotak Securities and K Damani Securities.
According to section 32 of the I-T Act, depreciation can be claimed either in respect of “buildings, machinery, plant or furniture, being tangible assets” or “know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets”.
The appeal filed by the I-T Department states that depreciation is not allowable on the membership card of the Stock Exchange as the card is not a depreciable asset. As such, it is not capable of diminshing in value due to its use, wear and tear and obsolescence.
Also, the stock broking firms are not the owners of the membership cards. The card is, in fact, a privilege given by the stock exchange to its members, the I-T Department’s appeal states.
However, the broking firms were given respite by the tribunal, which allowed them to claim depreciation on the ground of their submission that the membership card was a capital asset through which a right to trade on the stock exchange is acquired by the broker.
Also, the card is an intangible asset within the definition of the section 32 of the I-T Act. The I-T Department, then filed appeals before the high court, challenging the tribunal’s decision in favour of the said brokers.